Shareholders should ask about succession planning at AGMs

IT IS encouraging to hear anecdotal testimony from corporate governance advocates that shareholders attending annual general meetings (AGMs), either virtually or in person, are asking more pertinent questions of their managements.

More shareholders, it appears, are taking an interest in areas relating to corporate strategy, companies’ plans to transit from a pandemic to an endemic phase, and even environmental, social and governance issues. This is above and beyond the usual focus on dividends. There is, however, one area which rarely receives shareholder attention, and that is succession planning. As many companies are still owned by the first or second generation of their founding family, this is one subject which should be raised.

In its 2013 study of family-owned firms listed on the Singapore Exchange, the National University of Singapore’s Centre for Governance, Institutions and Organisations (CGIO) found that for family-owned firms, leading board positions such as chief executive officer (CEO) and chairman are mostly held by family members (78.6 and 72.9 per cent respectively). It also found that 42.8 per cent of the family firms combine the roles of CEO and chairman in one person, often a family member.